DAILY DIGEST

Benny Evangelista, Dan Fost

Published
4:00 am PST, Thursday, February 19, 2004

No paper trail at Tyco for execs' bonuses

-- Under cross-examination at his trial on criminal fraud charges, Mark Swartz, the former chief financial officer of Tyco International, acknowledged Wednesday that no documents existed to support the version of events he offered last week about millions of dollars in bonuses he received in 1999 and 2000.

In his first full day of cross-examination by prosecutors, Swartz did not disagree when Marc Scholl, an assistant district attorney, pointed out that Swartz took millions of dollars from Tyco at the beginning of the company's 2001 fiscal year under a bonus program explicitly designed to reward executives based on the company's full-year financial results.

Swartz and Dennis Kozlowski, Tyco's former chief executive, are charged with stealing $170 million from the company by hiding details of their pay packages from the company's board. Swartz and Kozlowski are also accused of stealing $430 million by selling the company's stock after artificially pumping up its price.

The trial has moved slowly, and the prosecution rested its case earlier this month after presenting evidence for four months.

Swartz told jurors last week that he and Koz-lowski received their bonuses legally under a program that rewarded senior Tyco executives if the company's profits exceeded certain levels. Swartz said Tyco's compensation committee had agreed that the bonuses should be based not just on the company's operating profits but also on one-time gains if it sold subsidiaries.

In general, investors prefer companies to reward executives for producing recurring income, not one-time gains. Tyco's incentive plan does not explicitly mention whether one-time gains should be included or excluded in the calculation of bonuses.

In 1999 and 2000, Swartz received about $30 million in special bonuses. Kozlowski took home about $60 million. Prosecutors have argued that those bonuses were hidden from the company's board and not approved.

Zubkoff was the former chief technical officer of VA Linux Systems Inc., the Fremont company now called VA Software Corp. Before joining VA Linux in 1998, Zubkoff worked by day as a principal member of the technical staff at Oracle Corp. and by night helping to refine the open-source Linux operating system. He was 44 when he died in an August 2002 helicopter crash while vacationing in Alaska.-- Benny Evangelista

Kevin Keane has been named executive editor and vice president for news at ANG Newspapers, the latest management change at the East Bay publishing group. Keane, editor of the Lowell Sun in Massachusetts since 2000, replaces Nancy Conway, who left ANG last May to become editor of the Salt Lake Tribune.

The chain last month named Ian Lamont president, publisher and chief executive officer, succeeding Beverly Jackson, who left in August after five months on the job. Lamont had been publisher of the Long Beach Press-Telegram.